Texan hedge fund manager J. Kyle Bass, the founder of Hayman Capital, said he had this “out of body” experience when he had a private meeting with a top central banker. “I had a fascinating kind of out of body experience meeting with one of the world’s top central bankers, in a private meeting, about three years ago. And he said, ‘You know Kyle, quantitative easing only works when you’re the only country doing it.’ Now he would never say that publicly,” Bass told Grant Williams, the author of the newsletter “Things That Make You Go Hmmm,” in a wide-ranging interview on Real Vision Television, a subscription financial news service. Bass didn’t name the central banker he met, but he noted that he was “one of the four top central bankers in the world.” “But it was one of those moments where I…it was one of those epiphanies almost, where it’s something you and I knew, but hearing him say it….it was a jarring experience for me, because when I look around the world today, everyone’s in the same boat. So we’re all trying…we’re attempting through our Treasury and our Fed to get the rest of the world to not devalue against us, while we quietly attempt to devalue ourselves against them, and it’s all this…it is the race to the bottom, it is the beggar thy neighbor policies that we all talk about. And I believe that there is no way out.” In the aftermath of the financial crisis, central bankers around the world unleashed ultra easy monetary policy. One of the efforts involved the Fed making large-scale purchases of bonds, aka quantitative easing. Eight years later, interest rates are still at or near zero, and in some cases, negative. In the end, Bass thinks central bankers will move to an even more aggressive easy policy referred to as helicopter money. “I believe that there is no way out. But going from a problem of Ricardian equivalence to helicopter money is like a natural, logical step for them. I’m glad I’m not them. But as a global participant, and more importantly as a global citizen, you know how to allocate your assets in that scenario, and you need to own productive assets to try to defend yourselves from this.” During the hour-long interview, Bass discusses position sizing, gold, the U.S. economy and investing around central banks. He also focuses heavily on China, which he’s predicted will have a meltdown greater than the 2008 financial crisis. The full interview is available with a free 7-day trial of Real Vision Television. https://www.yahoo.com/news/thing-top-central-banker-told-000000371.html
link? I would like to read how he framed it. I doubt Krugman called it a race to the bottom ending with helicopter money.
This is just such a great time to be a currency trader. Everything is working just as it should. We are all betting on the race to the bottom. Spread that over 6 currencies and it's like playing whack a mole. What we need around here are more currencies. This 6 sided war is never going to end. Yuan would make it Lucky 7?
Sometimes its called "currency wars", "competitive devaluation", or whatever, but it means the same thing. It's only important with regard to your main trading partners. And the odd thing is that QE works through public sentiment, so markets go up because everyone thinks the central bankers are "printing" and few beyond the Central Banks, and Samuelson's students of course, really understand that QE is not the same as printing. This myth is happily encouraged by Central Bankers themselves who don't mind if you call it printing, and they may even join in. But of course it isn't printing and that's why the expected inflation does not arrive. But pssst, don't tell anyone the secret. QE is how you raise cheap money quickly for economic stimulus without fueling inflation or putting upward pressure on interest rates. And the money is cheap! I mean, really it costs almost nothing. The word from Europe is encouraging by the way. It seems the ECB quantitative easing program is starting to have its good effect on unemployment.These are not overnight, economic programs. One has to be very patient. It is approximately a twenty year cycle to go from full on QE to Balance Sheet shrinking. But the whole process is reversible, whereas real money printing can only be reversed with a bonfire, a revolution, or a war. Hats off to Bernanke and crew for being first. Bernanke's MIT Colleague, Mario Draghi, has a more difficult job because it took him too long to brow beat the Germans into going along, and because Europe does not have a fully integrated monetary system. They lack a Euro bond. Soros said last Spring in Frankfort that Germany should either agree to the Euro bond or leave the EU. Soros, as he usually is, was right. We can truthfully say that if Draghi can successfully pull this off under the handicap he must suffer, than he rather than Bernanke may be the greatest Central Banker of all time.
That's why I never use printed money anymore. Too many bon fires and wars and not enough revolutions.
that was a nice read piezoe. but have you considered the long term wealth destruction via misallocation of resources all this quantitative easing does? and the expected inflation may not arise at first for few reasons. the demand for money is down so the money does not circulate through the economy... but when the economy picks up the the extra money has the potential to cause run away inflation. You may wish to consult the austrian school of economics as some of their best predicted what has happened.
The relentless expansion of credit by the Fed creates artificial disparities based on political privilege and economic power. [We have repeatedly pointed out that Fed policy increases inequality.]David Hume, the 18th-century Scottish philosopher, pointed out that when money is inserted into the economy (from a government printing press or, as in Hume’s time, the importation of gold and silver), it is not distributed evenly but “confined to the coffers of a few persons, who immediately seek to employ it to advantage.” In the 20th century, the economists of the Austrian school built upon this fact as their central monetary tenet. Ludwig von Mises and his students demonstrated how an increase in money supply is beneficial to those who get it first and is detrimental to those who get it last. Monetary inflation is a process, not a static effect. To think of it only in terms of aggregate price levels (which is all Fed Chairman Ben Bernanke seems capable of) is to ignore this pernicious process and the imbalance and economic dislocation that it creates. As Mises protégé Murray Rothbard explained, monetary inflation is akin to counterfeiting, which necessitates that some benefit and others don’t. After all, if everyone counterfeited in proportion to their wealth, there would be no real economic benefit to anyone. [Remember, even Keynes himself - and Ben Bernanake - said that inflation is a stealth tax.] Similarly, the expansion of credit is uneven in the economy, which results in wealth redistribution. To borrow a visual from another Mises student, Friedrich von Hayek, the Fed’s money creation does not flow evenly like water into a tank, but rather oozes like honey into a saucer, dolloping one area first and only then very slowly dribbling to the rest. The Fed doesn’t expand the money supply by uniformly dropping cash from helicopters over the hapless masses. Rather, it directs capital transfers to the largest banks (whether by overpaying them for their financial assets or by lending to them on the cheap), minimizes their borrowing costs, and lowers their reserve requirements. All of these actions result in immediate handouts to the financial elite first, with the hope that they will subsequently unleash this fresh capital onto the unsuspecting markets, raising demand and prices wherever they do.” *** The Fed is transferring immense wealth from the middle class to the most affluent, from the least privileged to the most privileged. This coercive redistribution has been a far more egregious source of disparity than the president’s presumption of tax unfairness …. *** Before we start down the path of arguing about the merits of redistributing wealth to benefit the many, why not first stop redistributing it to the most privileged?” And Ben Bernanke himself said in 1988 that quantitative easing doesn’t work. As Ed Yardley notes: Two economists, Seth B. Carpenter and Selva Demiralp, recently posted a discussion paper on the Federal Reserve Board’s website, titled “Money, Reserves, and the Transmission of Monetary Policy: Does the Money Multiplier Exist?” [Here's the link.] [The study states:] “In the absence of a multiplier, open market operations, which simply change reserve balances, do not directly affect lending behavior at the aggregate level. Put differently, if the quantity of reserves is relevant for the transmission of monetary policy, a different mechanism must be found. The argument against the textbook money multiplier is not new. For example, Bernanke and Blinder (1988) and Kashyap and Stein (1995) note that the bank lending channel is not operative if banks have access to external sources of funding. The appendix illustrates these relationships with a simple model. This paper provides institutional and empirical evidence that the money multiplier and the associated narrow bank lending channel are not relevant for analyzing the United States.” Did you catch that? Bernanke knew back in 1988 that quantitative easing doesn’t work. Yet, in recent years, he has been one of the biggest proponents of the notion that if all else fails to revive economic growth and avert deflation, QE will work. http://www.zerohedge.com/contributed/2012-17-29/does-quantitative-easing-benefit-99-or-1
excellent, especially the part about concentrated wealth. It doesn't seem concentrated because it belongs to the government. And the other side says, "But isn't the government us, We the People?"